Nissan Motor Philippines, Inc.

July 17, 2007 BIR RULING [DA-386-07] Section 32 (B) (6) (b) Nissan Motor Philippines, Inc. Barangay Pulong Sta. Cruz Sta. Rosa, Laguna Attention: Ms. Marian S. Calimon Vice President-Treasurer Gentlemen : This refers to your letter dated May 15, 2007 requesting for a ruling that the separation benefits to be received by your employees who may be affected by the company's retrenchment program are exempt from income tax and consequently from the withholding tax. As represented, due to the unfavorable situation facing your company, Nissan Motors Philippines, Inc. (NMPI) has to reduce its production from twenty (20) units per day (UPD) to fifteen (15) UPD to address the decline in sales and prevent pile up of inventory. In view of the above, you were constrained to implement a retrenchment program in your company which will involve the termination of the services of ten (10) employees effective the close of business hours of May 30, 2007. In order to assist the affected employees, the company is prepared to pay separation benefits that are higher than what is required by law. This is in addition to the payment of accumulated, accrued benefits under the law and CBA and the proportionate amount representing 13th month pay. All affected employees were notified in writing of their termination last April 26, 2007. TcCDIS In reply, please be informed that pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee shall not be included in the gross income and shall be exempt from taxation under Title II of the Tax Code. Accordingly, this Office hereby holds that any and all amounts to be received by the employees who may be affected by NMPI's retrenchment program are exempt from income tax and consequently from the withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended. The payment of salaries, however, is subject to income tax and consequently to withholding tax (BIR Ruling No. DA-078-2000 dated February 2, 2000). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service